Tracking Reimbursable Expenses as a Canadian Freelancer
When clients owe you money for out-of-pocket expenses, your tracking system determines how fast you get paid — and whether the amount is correct.
Marcus Chen
Tax Specialist
Reimbursable expenses are costs you pay on a client's behalf that the client has agreed to cover. The tax treatment differs from pure business expenses: if a client reimburses you exactly, the reimbursement and expense cancel out — no net deduction, but also no net income. If you're reimbursed less than you spent, the shortfall is your business expense.
The Key Rule: Tag Reimbursables at the Point of Purchase
Mark every reimbursable expense as such the moment you capture the receipt. Trying to identify reimbursables from memory at billing time means some will be missed — which is money lost. The expense note should include: the client name, the project, and whether the full amount or a percentage is reimbursable.
GST/HST on Reimbursable Expenses
- If you're GST/HST-registered and the expense is reimbursed, you may need to charge GST/HST on the reimbursement as part of your supply
- Whether reimbursements attract GST/HST depends on whether the expense is considered a 'disbursement' (passthrough) or a 'supply' (your service)
- True disbursements — where you act purely as a payment agent — generally don't attract additional GST/HST
- Consult a tax professional if your reimbursements are significant — the rules are fact-specific